Estate Planning for Children and Adults with Disabilities
Do you have a child or other loved one with physical, intellectual, or mental health challenges that impact their ability to live independently or manage their affairs? Do you have concerns about his or her future financial security in a world without you? If the answer is yes, then you need to ensure that you “do no harm,” when including them in your estate plan.
You are in good company.
There are approximately three million families in the U.S. who report having at least one minor child with a disability. No one needs to tell you or these families about the unique challenges that come with caring for a child with a disability or other special needs. This hands-on caregiving leaves little time to ponder what would happen in terms of financial security, were your child with special needs to outlive you.
Research also bears this out. Shockingly, more than half of all parents caring for a child with special needs have no long-term care plan in place, including an estate plan. Of those parents who have created an estate plan, about half report planning to leave an inheritance outright to their child. Many of them have already designated their child as a direct beneficiary on life insurance and retirement funds. Does this sound familiar?
The Challenge
Many people with disabilities will qualify for Medicaid or other means-tested programs to cover the cost of medical care and supportive services. This means that people can only own or have access to limited financial resources in order to first become and then remain eligible for benefits. Inherited assets can be more of a problem than a solution when they make your loved one in need of assistance ineligible for such aid. If your loved one is eligible for benefits, then any direct inheritance will be claimed by the government as reimbursement for benefits paid during his or her lifetime. Only after such reimbursement, may any remaining funds pass as directed to family members.
How can your estate planning avoid triggering ineligibility for benefits and keep the inheritance in your family long-term?
The Solution
The appropriate estate planning approach to provide an inheritance “safety net” for a loved one with a disability is known as a special needs trust (SNT). The primary objective of a SNT is to pay for goods and services to benefit the recipient, without disrupting eligibility for public assistance programs. In short, your loved one may only “own” limited resources, but he or she can use assets owned by the SNT or enjoy services paid for by the SNT.
For example, the SNT may own the condo where your loved one resides. Even though dental and vision examinations, braces, and eyeglasses are not provided by government assistance programs, the SNT can pay for them directly. In short, the goods and services benefitting your loved one through the SNT cannot “supplant” benefits otherwise provided by public assistance.
Closing Thoughts
The rules and regulations governing all aspects of a SNT are complex. As a result, there are many moving parts when it comes to creating, funding and administering a SNT. The consequences of a single misstep can be financially fatal to your estate plan. A SNT can be established as a standalone legal instrument, under a last will and testament, or under a revocable living trust. Regardless, you do not want to try to create a SNT as a DIY project. Work with an experienced Elder Law Estate Planning Attorney. Many people don’t realize that in order to become a Certified Elder Law Attorney, a person must demonstrate that they have experience and expertise working with clients who are disabled or who have other special needs.
Book a Call today to learn how you can safeguard your loved one’s future.
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